Premier League rights auction imminent

The first domestic bids for the English Premier League football auction are scheduled to be tabled on February 8th, according to a report from equity analysts at Berenberg Bank. The bids will cover various options covering three seasons from 2019-2020. The bank is interested because of the potential impact the costs will have on Sky’s and BT’s 2020 financial year.

The bank, as well as numourous other outlets, speculate that Amazon will likely be a bidder this time around, and could even win one of the packages.

The bank says that the auction will again be for seven packages. “However, the allocation of the rights is different this time around, with the Premier League choosing to offer a full weekend of matches over one bank holiday weekend as well as a block of midweek matches. The rights are being offered on a technology-neutral basis, ie there is no specification as to the platform over which they can be distributed.”

“Cost inflation has remained high in sports rights, given that these remain key drivers of pay-TV subscription growth and loyalty. UEFA Champions League rights were renewed at 32% more than the previous deal, the value of English cricket UK TV rights?] nearly trebled and the Football League rights are understood to have almost doubled on a per season basis. This is without any apparent intervention from new players like the US online giants, and suggests that cost inflation could remain substantial for the Premier League rights as well. We currently assume 35% cost inflation for Sky and 18% for BT, assuming like-for-like renewal, ie five and two packages, respectively.”

The bank’s media team thinks Amazon is a credible bidder this time around: “While Netflix has ruled itself out of the bidding, and has shown no sign of interest in sports rights in other markets, this is not the case for Amazon. Press reports have recently confirmed Amazon’s interest in bidding, following its purchase of various tennis and American football rights. Meanwhile, Facebook and Twitter have also been flirting with premium sports broadcasting, although we view these two parties as unlikely to be meaningful players in the auction, at least not this time.”

Berenberg adds that Amazon could well win “at least” one of the bundles on offer. “Firstly, because this opportunity only comes up every three years, and if successful this time around, Amazon will have an advantage over its peers should they choose to go down a similar route. Secondly, because even if monetisation would not be immediate, we think Amazon is prepared to invest heavily in order to build a position in the broader video market, and these rights would be ideal for that strategy. Thirdly because we think the Premier League itself has an eye to the next auction, and awarding one or two more minor packages to Amazon would provide some titillation for more major auction participation next time around (and thus a further step-up in terms of pricing).”

Despite the threat of Amazon’s cash in the process, Berenberg’s telco analysts – as distinct from its media team – think that the end result is still likely to be a Sky-BT duopoly. “[The telco team] do not buy our arguments about monetisation being a longer-term game for Amazon, and think that BT – the more vulnerable bidder in this auction given that it has the smaller set of rights – has better opportunities to defray the cost of the rights and superior strategic arguments for continuing to broadcast Premier League football.”